Underwriting rules engines have been used in the life insurance industry since the advent of jet underwriting programs. The concept is relatively simple: design rules such that underwriters spend as little time as possible on clean cases and focus more of their time on complicated cases.
However, in practice, the use of rules engines has many challenges. For underwriting rules engines to materially change the life insurance underwriting paradigm, they must do more than just automate a simplified issue questionnaire. They must align with and balance the needs of applicants, underwriters, producers and actuaries.
Here are five characteristics the underwriting rules engines of the future must possess:
1. Short, well-written questions
Answering underwriting questions has been, and continues to be, the most cumbersome part of the life insurance sales process. The goal of the underwriting rules engine should be to gather all relevant underwriting information in as few questions as possible.
To achieve this goal, they must consider not only what is asked, but also how and when a question is asked. Questions must be scripted such that the answers provided are specific enough for an applicant to provide an equally specific response. The more specific the response, the more effective the underwriting rules engine is at selecting good risks.
Underwriting rules engines must also be structured so that the questions asked are asked only once and use all information available. If structured appropriately, sufficient information will be gathered in a manner that is least intrusive to the prospective buyer. The result is an improved sales process that will increase placement ratios and persistency rates while keeping producers satisfied and loyal.
2. Smarter data use
In order to get an answer as quickly as possible, underwriting rules engines must use all available information to make a decision. The availability of digitized data that can influence an underwriting decision in the U.S. market is immense. An effective underwriting rules engine must use all available electronic data and adapt to the information gained from these other sources. If you know the applicant is on medication for high blood pressure, this knowledge should be used in both the type of question you ask and your decision.
This can be a challenge since not all electronic data is always available instantaneously. Consideration must be given to the type of data available, its impact on both the underwriting decision and the types of questions asked, and the time it takes to obtain such information. The resulting perspective must then be balanced with product pricing and the desired customer experience.
3. Full integration with the sales process